SoftBank Vision Fund hopes to make Ola and Uber ride together in India

Ola and Uber are currently losing crores every month as they compete for market share and invest in driver incentives and discounts, making profitability a tough goal.Madhav Chanchani&Arijit Barman | ET Bureau | September 01, 2017, 09:34 IST

MUMBAI: Japanese telecom and Internet conglomerate SoftBank is hoping “to make peace” between portfolio company Ola and its chief rival in the ride-hailing space, Uber, if its potential investment in the US-based company goes through.

The $100-billion SoftBank Vision Fund’s CEO Rajeev Misra said the firm has “an exclusivity with Uber to buy a secondary stake” and if the transaction closes, it will lead to “short-term conflict but long-term benefit” as it creates a worldwide empire in the ride-hailing space and further consolidates SoftBank as the dominant global force.

“We own more than 30% in Ola and we would own much less stake in Uber, but we are with Ola since 2014 and it does send conflicting signals to the trenches… It’s not easy and not always about economics,” Misra admitted in his first interview with the Indian media.

SoftBank has been the biggest backer of Uber’s rivals across Asia, with investments in China’s Didi Chuxing and Southeast Asia’s Grab, besides backing Ola since 2014.

The recent news of SoftBank being in talks to pick up a large stake in Uber through purchase of shares from existing investors has raised questions of conflict, and whether the fund will push consolidation among its companies.

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Both Ola and Uber India are currently losing hundreds of crores every month as they compete for market share and invest in driver incentives and discounts, making profitability a tough goal. Ola has raised $1.75 billion till now while Uber has committed at least $1billion to its India operations.

SoftBank will explore consolidation among other portfolio companies as well in the future, even after it failed to merge Snapdeal with India’s largest etailer Flipkart last month.

SoftBank had also pushed for a merger of Snapdeal’s wallet subsidiary FreeCharge with the country’s biggest mobile payments player Paytm, which also failed.

But despite the failure of these consolidation moves, SoftBank has announced a $2.5-billion investment in Flipkart and will pump $1.4 billion into Paytm this year. Misra said “there will always be room for consolidation if it makes sense” between the two companies, without elaborating further.

Misra (55), a flamboyant former fixed income banker-turned-iconoclast investor who joined the board of SoftBank in May, also admitted that consolidation is not simple. “There are big egos with these entrepreneurs. Very big. It is not easy. It is not all about economics; I wish it was.”

The DPS-Mathura Road and IIT-Delhi alumnus also said the vision fund will drive synergies between portfolio companies and help them expand globally, citing the example of budget hotels player Oyo Rooms.

“The way we help our portfolio companies is we connect them with the ecosystem, we make regional companies like Oyo go global. We connected them to Alibaba, SoftBank Mobile… It’s a novel concept. So we gave him capital, technology and access,” he said in a video interview from his base in London.

SoftBank may also invest in digital financial services, healthcare and construction. Misra is eagerly waiting to see how “the dust settles” in the Indian telecom space before thinking of parking some of his dollars. Investments in broadband and DTH are also under consideration.

The same caution applies to the renewables sector, where SoftBank, Bharti and Foxconn have joined hands for a mega alliance. While he believes his new partners, like the Saudis, can coinvest on the platform through the vision fund, he feels the current low tariffs do not make sense.

“We have a minimum IRR threshold and the solar business that we bid for, don’t have those kind of returns right now for the fund. It is good for the country, since electricity will become cheap, but it doesn’t make sense for the fund right now.”